Seminar（Dept. of Trade Economics）

Theme：Trade Wars and Industrial Policies along the Global Value Chains

Speaker：Zi Wang(Shanghai University of Finance and Economics)

Time：2020-10-20 15:00

Address：Tencent Meeting

Language：English/Chinese

Abstract：

We provide a quantitative estimation of the welfare impacts of the US-China trade conflict starting at 2018. We first document that the Trumpian tariffs were initially concentrated in a few high-tech manufacturing industries emphasized by the ``Made in China 2025" ("MIC 2025") project. These industries (i) exhibit strong economies of scale, and (ii) have low elasticities of substitution as inputs for other sectors. Motivated by these features, we extend the quantitative trade model developed by Caliendo and Parro (2015) by incorporating sectoral external economies of scale and nested-CES input-output linkages.  We calibrate the model to 7 major economies and 95 disaggregated industries in 2016 and examine the impacts of the Trumpian tariffs and the ``MIC 2025" project. We find that the Trumpian tariffs lead to welfare losses in China, where high-tech industries are disproportionately affected. Surprisingly, ``MIC 2025" increase the US welfare by lowering prices of inputs imported by the US firms. Moreover, we find that the Trumpian tariffs actually increase China's welfare gains from ``MIC 2025".